How to Spot Check Fraud
Businesses face any number of threats and challenges today that include economic uncertainties, rising costs, supply chain issues, finding qualified employees along with others. One threat most business owners never consider is the threat of fraudulent activity on their checking accounts.
Check fraud includes forgeries, counterfeit checks, and altered checks. Advances in technology have made check fraud much easier and is costing banks and businesses billions of dollars each year.
According to Evidence-Based Cybersecurity Research Group, an average of 1,325 stolen checks were up for sale every week during October of 2021. This was more than double what was seen in September 2021.
A technique that is very difficult to detect is “check washing”. The fraud perpetrators take valid checks that are stolen in the mail or by other means, erase the check payee, and inserts a fraudulent payee. The check number, date, amount, and authorized signature are all correct. The only alteration is the check payee and with advances in technology, it is virtually impossible to detect when deposited into an account established for the washed checks. No one is aware of the fraud until the valid payee of the check calls in 30 days to inquire about their payment.
Laws and regulations that cover fraudulent checks are complex and situation-specific. The business could be responsible for losses if the fraudulent checks are not reported within specific time requirements. How does a business protect itself from this growing risk?
One solution is a bank service called Positive Pay/ACH Block. With this solution, the business uploads a file containing check information to its bank as soon as a batch of checks is written. When the check attempts to post to the account, the positive pay system will compare the specifics of the clearing check to the information submitted into the positive pay system. If all check specifics are a match, the check clears in the normal course of business.
If there is a mismatch, the check is rejected from the normal clearing process, generates an exception and is scheduled for return. The business owner is notified by email of the mismatch exception and given a chance to review the item and pay if the item is determined to be legitimate. If the business chooses not to respond or is away and can’t respond, the check is returned.
Submitting check information into Positive Pay is very simple. The business owner creates a copy of a check file from their accounting software and then uploads it to the positive pay system.
Another risk is ACH fraud. ACH Block is a companion service to Positive Pay that is easy to use and can stop fraudulent ACH charges before they occur. Check and ACH fraud are serious threats and all businesses are targets. Connect with us to learn more about this fraud prevention service and other methods to protect your account.
Content Source: Village Bank and the Chesterfield Chamber of Commerce.